The ABCs Of EMV: Gemalto’s Basic Breakdown

Odds are you’ve heard of EMV and the looming U.S. migration date, the advantages the technology provides, and the complex barriers that merchants, issuers and acquires all face. There’s a lot to digest, so PYMNTs.com spoke with Philippe Benitez, vice president of marketing, Secure Transactions for Gemalto North America to get a basic breakdown of what the transition entails. How will the coming fraud liability shift affect the industry, and what can consumers gain from EMV?

The ABCs Of EMV: Gemalto’s Basic Breakdown

You probably know that a U.S. shift to EMV payments is coming. You’re likely familiar with EMV’s predominance outside the U.S. You may even know the biggest deadlines, such noticeably April 2013 and October 2015.

But do you fully understand EMV’s advantages over magstripe, and the barriers faced by merchants, acquirers and issuers alike? Do you know how EMV acceptance will affect contactless payments and other form factors within the industry?

There’s a lot to keep track of, and as the U.S. heads towards the rest of the EMV-centric payments world, it’s important to fully understand the technology and its ramifications. As such, PYMNTS.com spoke with Philippe Benitez, vice president of marketing, Secure Transactions for Gemalto North America, to discuss EMV, and to pick his brain on one of payments’ most important topics.

According to Benitez, who’s worked with Canada, Mexico and the U.S. on each country’s respective EMV migration, the key to understanding why EMV technology is important is to consider the role EMV cards take in a transaction compared to their magstripe counterparts.

“In a magnetic stripe transaction, the card plays a static role in the sense that when a cardholder swipes his card, the terminal transmits the data that you see on the front and the back of the card: the card holder’s name, the account number, the expiration date and that little three digit value on the back of the card,” Benitez explained. “That same data is transmitted every single time for every single transaction. If a fraudster is able to sniff the data online, they will be able to duplicate a card easily and then use it to perform fraudulent transactions.”

“In an EMV transaction, the card actually plays an active role because the chip, in essence, is a little computer that is running a payment program. And that card is able to approve or decline transactions offline on its own, if the banks want it to do so. The card can go online and request approval from the bank if that’s what the bank prefers too,” he said. “In all cases the card generates a messages using cryptographic technology that is different for every single transaction. So if a fraudster is ever able to sniff EMV transaction data on the network, it would be useless for them because they couldn’t create one of these counterfeit cards that are so easy to create with magnetic stripe data.”

Another interesting point Benitez brought up was that by being the late to the EMV party, so to speak, the U.S. will actually face lower adoption costs than many countries that came before. Benitez noted that EMV penetration has reached about 80 percent in Europe and 30 percent in Europe, and sits t around 50 percent worldwide for cards and 75 percent worldwide for POS terminals.

“[The cost] is not as steep as it’s characterized because the U.S. gets a huge benefit from being last to migrate and inheriting the economies of scale created by massive shifts to EMV everywhere lese in the world,” he pointed out. “I’d say that the U.S. payments industry is seeing unit costs that are less than half what the trailblazers saw when they started EMV migration several years ago.”

To hear more Benitez on what to look for as the EMV migration begins, listen to the full podcast here.

Philippe Benitez is a 15-year veteran of the global telecommunications and payments industries. As VP of Marketing for Gemalto Secure Transactions North America, he leads regional development efforts to increase card revenue for financial institutions through mobile payments, EMV and other value-added services. In various senior roles within Gemalto, Philippe has helped clients launch successful commercial EMV and mobile telecom programs in Europe, North America and South America, that serve tens of millions of consumers every day. Prior to Gemalto, Philippe was with Andersen Consulting and Schlumberger. He received an MBA from the University of Texas at Austin and an MSc in Industrial Engineering from Ecole Centrale Paris.